EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

EPAct Tax Aspects of the National Hockey League's Green Initiative

The National Hockey League (NHL), in partnership with the Natural Resources
Defense Council (NRDC), has implemented a program aimed at fostering
sustainable living and business practices for ice rinks. Since its launching,
in 2010, NHL Green has been at the forefront of the movement for sports
sustainability. The comprehensive initiative encompasses efforts in different
domains, such as waste management, environment preservation, and energy
efficiency. Notable examples are the award-winning food recovery program, NHL
Rock & Wrap It Up! and the water restoration program, Gallons for Goals.

In recent years, the relationship between sports and sustainability has
gained ever increasing attention. The National Basketball Association
(NBA)’s Green Initiative1 and the Major League Baseball
(MLB)’s Greening Program2 are other examples of this growing
awareness.

Intrinsically linked to the cold weather, hockey traces its origins to
frozen ponds. For years, burgeoning NHL stars have learned to skate and play in
these natural winter settings. By implementing energy efficiency projects, NHL
Arenas can greatly contribute to the League’s sustainability goals and to
the ultimate objective of perpetuating this tradition. Privately owned arenas
and designers of public ones can take advantage of energy tax savings that
significantly improve the economic payback of such measures.

The EPAct Tax Opportunity

Pursuant to Code Sec. 179D, as enacted by the Energy Policy Act of 2005
(EPAct)3, properties that make qualifying energy-reducing
investments in new or existing locations can obtain immediate tax deductions of
up to $1.80 per square foot.

If the building project does not qualify for the maximum EPAct $1.80 per
square foot immediate tax deduction, there are tax deductions of up to $0.60
per square foot for each of the three major building subsystems - lighting;
heating, ventilating and air conditioning (HVAC); and building envelope. The
building envelope comprises every item on the building's exterior perimeter
that touches the outside world including roof, walls, insulation, doors,
windows and foundation.

EPAct tax savings are driven by square footage. As a result, big structures
such as NHL arenas have enormous potential for deductions. Exhibit 1
illustrates benefits available for U.S. arenas and training facilities.

Energy Efficient Lighting

As most sports facilities, NHL's arenas consume an immense amount of
electricity for interior building lighting. In this scenario, replacing
inefficient lighting is not only a major opportunity for energy savings, but
also a strategy for cutting operating costs. In addition, qualifying interior
stadium lighting projects are eligible for up to a $0.60-per-square-foot
immediate EPAct tax deduction. Adjacent parking garages are also strong
candidates for such deductions.

LED lighting stands out as a promising solution for hockey arenas. This new
technology is significantly more efficient and has a much longer lifespan than
traditional ones. Contrary to metal halide fixtures, which need to be heated to
emit life, LEDs light up instantly. If the Mercedes-Benz Superdome were
equipped with LED lighting; the nation would not have had to wait for 30
minutes for the 2013 Super Bowl to resume after a power outage.

With the objective of fostering sustainable operating practices and
procedures in the Bridgestone Arena, NHL’s Nashville Predators have
recently conducted energy audits that lead to the establishment of concrete
efficiency goals. The planned improvements to the lighting system will utilize
daylight-harvesting next to glass curtain walls. According to the senior
director of operations for the arena, Terry McConnell4, the process
will allow for the better use of daylight throughout the facility. To further
reduce energy consumption, inefficient bulbs will be replaced with
energy-saving ones; bi-level lighting controls and energy-efficient lamps will
be used in the place of metal-halide sources. EPAct tax savings are available
to assist the Predators’ efficient lighting projects.

Energy Efficient HVAC (Heating, Ventilation, and Air Conditioning)

Ice Hockey arenas have very particular interiors. In these locations, HVAC
systems must be able to keep the ice in good condition, avoid fog formation,
prevent excess moisture, and ensure spectators safety and comfort. Therefore,
and particularly during peak summer months when temporary dehumidification is
necessary, HVAC generates huge energy consumption. Arenas can use highly
efficient special purpose HVAC solutions, such as energy recovery ventilation,
geothermal, and thermal storage, to greatly reduce energy usage and potentially
qualify for a large EPAct HVAC tax deduction.

With the objective of attaining greater HVAC efficiency standards throughout
the League, the NHL has made Johnson Controls’ York HVAC division a
global leader in sustainable solutions, the official HVAC partner for the
2012-2013 season5. NHL arenas investing in highly efficient HVAC
systems generally qualify for the $1.80-per-square-foot tax deduction presented
above. Those that already have such systems should be positioned to obtain the
maximum EPAct deduction when making further energy reducing projects.

Energy Efficient Building Envelope

Unlike lighting and HVAC, the building envelope does not actually consume
energy so the $0.60-per-square-foot Section 179(D) building envelope energy tax
deductions will be predicated by achieving energy efficient lighting and, in
particular, HVAC energy efficiency targets.

Arenas that have undergone or are currently implementing highly energy
efficient measures, will be positioned to simultaneously achieve large tax
deductions for investments made in qualifying building envelope items, such as
roofs, walls, doors, windows, foundation and insulation.

Sustainable Slapshots

NHL Green has inspired several sustainable initiatives throughout the
League, particularly with regards to energy efficient facilities. The following
table presents a few examples of these “sustainable
slapshots”6:

Bridgestone Arena has undergone both energy usage and water
consumption audits. Sustainable goals were established and improvements
are under consideration. In addition to efficient lighting, the
Predators will upgrade their HVAC system: enthalpy-based economizer
controls are planned for all air-conditioning units, occupancy-based
controls, night setbacks, and variable frequency drives will be
utilized on unit fans.

Minnesota Wild has implemented an ambitious, strategic plan to reduce
the Xcel Energy Center’s carbon footprint. After major upgrades
and the development of on-site renewable energy, the arena has achieved
a 42% carbon footprint reduction and is 13.3% more efficient than the
average for similar facilities.

The Phoenix Coyotes have implemented various building management
policies aimed at fostering sustainability. The energy-saving demand
response program developed at the Jobing.com Arena has been considered
highly innovative and effective.

The Scottrade Center, home of the St. Louis Blues, is reducing energy
consumption through new staff policies and strategic capital upgrades.
The arena has recently undergone a major lighting retrofit that
resulted in higher efficiency and better lighting. Backlit signs were
also upgraded to LED technology, becoming three to eight times more
efficient. Additionally, variable frequency drives were installed in
the facility’s cooling tower, further reducing energy
consumption.

San Jose Sharks’ HP Pavillion has recently become the first
multi-purpose sports and entertainment facility to utilize fuel cell
technology as a supplemental electricity source. The activation of
Bloom Energy Servers has provided more affordable, reliable, and
efficient energy source. The Arena’s carbon footprint is expected
to be reduced by 4.8 million pounds of CO2 over ten years.

Home to the Pittsburgh Penguins, the CONSOL Energy Center is the
first LEED certified NHL Arena. The facility has achieved the Gold
standard and is an outstanding example of sustainability among sports
venues.

Conclusion

Rising sustainability standards for NHL arenas have come to stay. "We need
to make our buildings as efficient as the athletes that use them," said the
former New York Rangers goaltender and Stanley Cup champion Mike Richter, now a
principal at Healthy Planet Partners7. To this end, the League has
established a metrics tracking system, designed to capture and analyze a
facility’s energy, water, and waste consumption. EPAct tax deductions are
available to assist the quest for high performance NHL arenas.